--- Dan Heath <da...@alltel.net> wrote: > I see some mention of Revenue regarding such partnerships. I would assume > that there would be no revenue, so why is it an issue? The only purpose > that Jerry or I would have for forming a partnership would be so that we > would be protected from that L word, as much as possible, and to see to it > that no one tried to take the plane from either of us in the event that > something real bad happened to either one of us. > > N64KR > > Daniel R. Heath - Columbia, SC > > da...@kr-builder.org >
Dan, The revenue comes into it indirectly in two ways. First, by definition, a "partnership" is two or more partners pooling capital in an effort to make a profit. In reality, there are plenty of partnerships to hold assets, family limited partnerships used in estate planning & so forth that make little or no profit and to the layman are certainly not businesses for profit. Second, as I mentioned one of the asset protection angles is that a plaintiff with a charging order against a partner can, according to the IRS, have constructive receipt of phantom income which he never recieves but is taxed on. That possibility is usually more than enough to scare off predatory plaintiff lawyers. No guarantees of course. Finally, you are correct that partnerships are not taxed even if they make profits. The profits (or losses) are passed through to the individual partners. This is documented on a form K-1 and each individual partner shows his distributed share of the profits (or losses) on his personal 1040 tax return. Finally, I repeat, get legal advice on this. Everything I say is only for information and not legal advice. Also, remember that the Limited Partnership (the kind you want) is created pursuant to state statute and must be filed with the Sec. of State. The legal formalities are few and simple, but they must be complied with or the partnership may be treated as a general partnership (bad, bad, bad from a liability standpoint). A good lawyer can also advise you on estate planning aspects of the partnership. If you die, is your wife going to stay in the partnership and fly the plane? If so, perhaps she should be a partner too. On the other hand, if her interest will be liquidated and she is not a pilot there is no point. Same for the other partner & spouse. Is your partnership going to include a buy-out agreement where the other partner buys your part in the event of some defined thing happening (such as when you die)? If the amounts involved are more than each partner can afford easily, does funding a buy-out agreement with an insurance policy make sense (common sense tells me probably not on a single KR-2). Lots of little things like that which you may not think of. Good counsel will guide you to think of them, look at your fact situation and derive a plan that works for you and your partner. Hope this is helpful. Regards, Dean Allen __________________________________ Do you Yahoo!? The New Yahoo! Shopping - with improved product search http://shopping.yahoo.com
